nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒02‒04
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. Of mice and merchants: trade and growth in the Iron Age By Bakker, Jan David; Maurer, Stephan; Pischke, Jörn-Steffen; Rauch, Ferdinand
  2. The inverted-U relationship between credit access and productivity growth By Aghion, Philippe; Bergeaud, Antonin; Cette, Gilbert; Lecat, Rémy; Maghin, Hélène
  3. The dynamics of health care and growth: A model with physician in dual practice By Baris Alpaslan; King Yoong Lim; Yan Song
  4. The Out of Africa Hypothesis of Comparative Economic Development: Common Misconceptions By Quamrul H. Ashraf; Oded Galor; Marc P. B. Klemp
  5. Human Capital and Economic Growth. By Claude DIEBOLT; Charlotte LE CHAPELAIN
  6. Innovation and trade policy in a globalized world By Akcigit, Ufuk; Ates, Sina T.; Impullitti, Giammario
  7. Change and Persistence in the Age of Modernization: Saint-Germain-d'Anxure 1730-1895 By Guillaume Blanc; Romain Wacziarg
  8. North-South Uneven Development and Income Distribution under the Balance of Payments Constraint By Sasaki, Hiroaki

  1. By: Bakker, Jan David; Maurer, Stephan; Pischke, Jörn-Steffen; Rauch, Ferdinand
    Abstract: We study the causal connection between trade and development using one of the earliest massive trade expansions: the first systematic crossing of open seas in the Mediterranean during the time of the Phoenicians. We construct a measure of connectedness along the shores of the sea. This connectivity varies with the shape of the coast, the location of islands, and the distance to the opposing shore. We relate connectedness to local growth, which we measure using the presence of archaeological sites in an area. We find an association between better connected locations and archaeological sites during the Iron Age, at a time when sailors began to cross open water very routinely and on a big scale. We corroborate these findings at the level of the world.
    Keywords: urbanization; locational fundamentals; trade
    JEL: F14 N7 O47
    Date: 2018–07
  2. By: Aghion, Philippe; Bergeaud, Antonin; Cette, Gilbert; Lecat, Rémy; Maghin, Hélène
    Abstract: In this paper we identify two counteracting effects of credit access on productivity growth: on the one hand, better access to credit makes it easier for entrepreneurs to innovate; on the other hand, better credit access allows less efficient incumbent firms to remain longer on the market, thereby discouraging entry of new and potentially more efficient innovators. We first develop a simple model of firm dynamics and innovation-base growth with credit constraints, where the above two counteracting effects generate an inverted-U relationship between credit access and productivity growth. Then we test our theory on a comprehensive French manufacturing firm-level dataset. We first show evidence of an inverted-U relationship between credit constraints and productivity growth when we aggregate our data at sectoral level. We then move to firm-level analysis, and show that incumbent firms with easier access to credit experience higher productivity growth, but that they also experienced lower exit rates, particularly the least productive firms among them. To confirm our results, we exploit the 2012 Eurosystem's Additional Credit Claims (ACC) program as a quasiexperiment that generated exogenous extra supply of credits for a subset of incumbent firms.
    Keywords: inverted-u relationship; credit; eurosystem
    JEL: J1 F3 G3
    Date: 2018–12
  3. By: Baris Alpaslan; King Yoong Lim; Yan Song
    Abstract: We present a growth model with micro-foundations of a mixed health care system and physician dual-practice, to analyze for welfare-optimal government financing strategy for a mixed health system in developing countries. Calibrating the model for Indonesia, we find that a government subsidy to private health care is both growth- and welfare-enhancing, whereas it is more effective for the government to invest in health infrastructure instead of a public-sector “rewarding” policy in raising government physicians’ wage if its goal is to improve physician effort in public practice. Indeed, for the “rewarding” policy, a dynamic trade-off in growth is found, which is not previously documented in the literature. We also find the model to produce two regimes with different welfare-optimal health financing (a “normal” regime and a low public-sector congestion regime). In the former, welfare-optimal health financing strategy appears to be promoting private health subsidy at the expense of public-sector physician wages. In the latter, the opposite is welfare-optimal.
    Keywords: Dual Practice, Economic Growth, Health Care Financing, Welfare
    JEL: H51 I11 I15 O41
    Date: 2019–01
  4. By: Quamrul H. Ashraf; Oded Galor; Marc P. B. Klemp
    Abstract: The importance of the prehistoric migration of anatomically modern humans from Africa for comparative economic development has been the focus of a vibrant research agenda in the past decade. This influential literature has attracted the attention of some scholars from other disciplines, and in light of existing methodological gaps across fields, has perhaps unsurprisingly generated some significant misconceptions. This article examines the critical views expressed by some scholars from other disciplines, and establishes that they are based on fundamental misunderstandings of the statistical methodology, the conceptual framework, and the scope of the analysis that characterize this influential literature.
    Keywords: comparative development, interpersonal population diversity, the out of Africa hypothesis
    JEL: O11 N10 N30 Z10
    Date: 2019
  5. By: Claude DIEBOLT; Charlotte LE CHAPELAIN
    Abstract: The aim of this entry is (I) to undertake a critical reading of the seminal contribution of Lucas’ work to construct a model which represents the complexity of the links between human capital and economic growth (II) to review the empirical assessments of its endogenous nature.
    Keywords: Economic Growth, Human Capital.
    JEL: E13 I20 I25 N30
    Date: 2019
  6. By: Akcigit, Ufuk; Ates, Sina T.; Impullitti, Giammario
    Abstract: How do import tariffs and R&D subsidies help domestic firms compete globally? How do these policies affect aggregate growth and economic welfare? To answer these questions, we build a dynamic general equilibrium growth model where firm innovation endogenously determines the dynamics of technology, market leadership, and trade flows, in a world with two large open economies at different stages of development. Firms’ R&D decisions are driven by (i) the defensive innovation motive, (ii) the expansionary innovation motive, and (iii) technology spillovers. The theoretical investigation illustrates that, statically, globalization (defined as reduced trade barriers) has ambiguous effects on welfare, while, dynamically, intensified globalization boosts domestic innovation through induced international competition. Accounting for transitional dynamics, we use our model for policy evaluation and compute optimal policies over different time horizons. The model suggests that the introduction of the Research and Experimentation Tax Credit in 1981 proves to be an effective policy response to foreign competition, generating substantial welfare gains in the long run. A counterfactual exercise shows that increasing tariffs as an alternative policy response improves domestic welfare only when the policymaker cares about the very short run, and only when introduced unilaterally. Tariffs generate large welfare losses in the medium and long run, or when there is retaliation by the foreign economy. Protectionist measures generate large dynamic losses by distorting the impact of openness on innovation incentives and productivity growth. Finally, our model predicts that a more globalized world entails less government intervention, thanks to innovation-stimulating effects of intensified international competition.
    Keywords: economic growth; short- and long run gains from globalization; foreign technological catching-up; innovation policy; trade policy; competition
    JEL: F13 F43 O40
    Date: 2018–12
  7. By: Guillaume Blanc; Romain Wacziarg
    Abstract: Using a unique, comprehensive household-level dataset for a single French village from 1730 to 1895, we study the process of modernization during a period of rapid institutional and demographic transformation. We document changes in fertility, mortality, human capital and intergenerational mobility, looking for structural breaks associated with the French Revolution and paying close attention to the sequencing of changes associated with various aspects of modernization in the village. We find that the fall in fertility preceded the rise in education by several decades. Demographic change is plausibly associated with institutional and cultural change rather than with changes in the opportunity cost of children. The rise in education occurred mostly as the result of an increase in the supply of schooling due to the Guizot Law, rather than demand side forces. All these changes occurred in the absence of industrialization in and around the village. We conclude that institutional and cultural changes originating outside the village were likely the dominant forces explaining its modernization.
    JEL: N13 N33 N43 O43 O52 Z10
    Date: 2019–01
  8. By: Sasaki, Hiroaki
    Abstract: This study builds a North-South trade and uneven development model, and investigates the effects of changes in income distribution (the profit share) on economic growth rates of both countries. How a change in the profit share affects both countries' growth rates differs for the short-run equilibirum and the long-run equilibrium. For example, in the short-run equilibirum, an increase in the profit share of the North deteriorates the terms of trade of the South, and then, decreases the growth rate of the South. On the other hand, in the long-run equilibrium, an increase in the profit share of the North either increases or decreases the growth rate of the South through Thirlwall's law.
    Keywords: North-South trade; Thirlwall's law, uneven development, income distribution
    JEL: F10 F43 O11 O41
    Date: 2019–01–14

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